THE BUSINESS OF DAIRY Strategies for Distributors to Weather the Supply Chain Crunch BY MIKE MARKS
A
s we’re all aware: The supply chain is no longer as dependable as it used to be. It’s now the equivalent of a wild pendulum with sporadic oscillations. Demand is also fuzzy and seems to be ever-changing. Think about the start of the pandemic when there was a massive shortage of masks and gloves. People were doing some really interesting things to find and stockpile these supplies. Now, companies give away masks and gloves because they have so much backstock. It’s the same scenario that is going to play out in the automotive industry. Right now, there’s a shortage of chips. Manufacturers are still making cars while they wait, so once they have the chips, there’s going to be overstock of vehicles and companies offering major deals and incentives to buy a new car. The current challenge is inflation. There are steep increases across the board. Because of inflation and an uncertain supply chain, manufacturers are hearing the same refrain from their distributors: “You have to stop passing the price increases because I can’t pass them on to my customers!” Or, “When are you going to deliver product to me?” It’s obvious that the exaggerated pendulum of a supply chain will be with us throughout this year and potentially into 38 • Northeast Dairy Foods Association, Inc.
2023. So how do distributors deal with the consequences and resulting inflation? In an inflationary environment, you have to watch closely for changes and, when you recognize a change, react quickly. You must be ready and able to make changes within the day or hours – not weeks. Being agile determines whether you succeed (and survive) an inflationary period.
HOW DISTRIBUTORS CAN RESPOND
Distributors need to be closer to their supply chain partners. Share more data and look for the best price. The companies that are more aligned with their suppliers are the most successful during unpredictable times. Get customers to behave differently. You have to figure out what the customer really needs and provide that, which might go against what they “want.” For example, although the cleaning industry is a recession-proof industry, it’s still supply-chain-dependent. Distributors can tell their customers not to schedule orders for rush delivery. You could say, “I’ll deliver 80% of your A items monthly and cover the cost of the freight, and you can add to that order any time you want, but you can’t change the order without a 30-day notice.” Here’s another example from the healthcare industry: A hospital called their distributor and requested 80 respirators,
